One subject that we write about often on the Construction Payment Blog is how long it takes to get paid in the construction business. In fact, it takes longer to get paid in construction than just about any other industry. The folks we talk to in the industry tell us that it often takes 60, 70, and even 100 days or more to get paid on their projects. Payment terms seem to have little to no impact. Whether your terms are “due upon completion,” “net 30,” or something else, sometimes it seems like the money comes in at its own, slow-as-molasses pace.
This is not to say that everyone in the industry accepts this status quo. Many contractors awaiting payment reluctantly find themselves in the collections business, making calls, sending emails, writing demand letters, and undertaking other activities trying to chase down money they’re owed.
And that begs the question: when a delinquent customer has promised that a late payment is forthcoming, should you wait to file a mechanics lien?
Mechanics Lien Deadlines Are Strictly Enforced
The short answer to this question is a simple and straightforward: “NO!”
You only have one chance to file a mechanics lien, and once that deadline passes, your lien rights are gone forever. Promises of payment will not extend the lien deadline. (Nothing extends the lien filing deadline — not even retainage.)
A “promise” to be paid is not the same thing as actually getting paid. Until the money you are owed is in your hands — really, until you have actually deposited that money into your bank account — you should not put off filing a mechanics lien. The risk of missing the lien deadline is just too great.
And that’s because the window to file a mechanics lien can be short. In most states, a mechanics lien must be filed within a specific time period after a company last furnishes labor or materials. This deadline can be as short as 30 or 45 days in some states.
In our experience we have seen too many contractors lose their ability to file a lien — and thus, lose their payment — by relying on an empty promise to pay.
Free Resources – Lien & Notice Deadlines
Click on the buttons below to download charts that cover lien and notice deadlines for all 50 states. (Looking for deadlines for public projects? Check out our article Bond Claim Deadlines in All 50 States.)
This Happens Even With the Best of Intentions
It’s easy (perhaps, a little too easy) to see non-payment issues in terms of good and evil. Using this analogy, you’ll have the “good guys” (the company that’s owed the money), and the “bad guys” (the delinquent payer). But it isn’t always that black and white. When a general contractor allows a lien against a project, that contractor is frequently considered in breach of contract with the property owner. As a result, many GCs on a construction project will ask parties not to file a mechanics lien, promising that payment is soon forthcoming.
But what if a dispute between the project owner and the general contractor is holding up payments to everyone else on the project? If your customer is the GC, they may tell you that payment is forthcoming — and they may believe this to be true. But if they’re negotiating a payment dispute with the owner and those negotiations break down, then that could affect the payment to you.
Instead of Waiting, File a Notice of Intent to Lien
If you’re promised payment on a construction project, it may be worth waiting a little while before filing a lien, especially if you have a long-standing business relationship with the payer and know them very well. However, a better idea might be to send a Notice of Intent to Lien. Notices of Intent are extremely effective at prompting payment for money owed on construction projects. That’s because the fear of having a lien filed on a project is just that great, and the Notice of Intent gives the paying parties one last chance — one final warning — to get the payment issue settled before a mechanics lien is filed. Follow this link to learn all about the Notice of Intent to Lien document.
We want to be perfectly clear about this, so please listen up!
Once the deadline to file a mechanics lien passes, you will no longer be able to file a mechanics lien. Period, end of story.
We understand that these situations can get pretty dicey. These aren’t just negotiations between nameless and faceless companies. There are real people involved in these payment issues, and sometimes the people involved have long-standing business relationships. But can you really afford to go without a project payment just to preserve a relationship? You’ll need to answer that question for yourself, but please remember that lien and notice deadlines are strictly enforced, and they’re no joke! Don’t lose out on getting paid due to a missed deadline!